Hold Shankara Building Products; target of Rs 325: ICICI Direct
ICICI Direct’s research report on Shankara Building Products
Shankara’s topline de-grew 18.6% YoY to Rs 639.3 crore on account of sharp revenue de-growth in the channel & enterprise division. The EBITDA margin expanded 220 bps QoQ to 4.9% mainly on account of better EBIT margins of the retail division at 8.1% in Q1FY20. EBIT margin for the channel & enterprise division was at 3.5% in Q1FY20 vs. 0.9% in Q4FY19. PAT de-grew sharply by 57.6% YoY to Rs 8.3 crore.
However, this recovery could take a few quarters before we see the positive impact on financials of the company. Hence, we have a HOLD rating on the stock with a target price of Rs 325/share. We value its retail business at Rs 304/share (7x FY20E EV/EBIT).
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